UK factories see slower growth in April

Growth in activity at British factories slumped in April delivering another dose of bad news for the economy just a week after overall economic growth came in far weaker than expected in the first quarter.

The closely watched Markit/CIPS survey of manufacturing purchasing managers' slumped to a seven-month low of 51.9 in April, down from 54 in March. It does, however, remain above the 50 mark that separates expansion from contraction.

Companies reported a decline in new orders from abroad, reflecting the ongoing struggle to boost exports with the eurozone.

The only real bright spot for manufacturing was continued strong domestic orders for consumers goods.

The disparity highlights the lack of progress in rebalancing the economy, particularly in light of separate data from the Bank of England out on Friday that showed lending to British consumers in March jumped by the biggest amount since before the financial crisis.

Samuel Tombs, senior UK economist at Capital Economics, said the data emphasised " the increasing dependence of the UK's economic recovery on consumers."

Rob Dobson, senior economist at survey compilers Markit, said that the survey showed "less than positive news" on the health of the manufacturing sector.

"A key challenge for the next government is to revive manufacturing and help it at least regain its pre-crisis peak, as any signs of rebalancing the economy towards manufacturing and exports remain frustratingly elusive."

Following the weaker than expected data, the pound fell to a session low against the dollar and a three-week low against the euro.

Lee Hopley, chief economist at manufacturers' organisation EEF, said that recent data pointed to a "marked loss of momentum".

She added that "while consumer facing sectors are still forging ahead thanks to low inflation and a pickup in wage growth, any sign that export growth was about to turn around at the end of last year now looks to have been a false dawn."

While mortgage lending remained subdued, overall consumer credit grew by £1.2bn in March, the largest monthly increase since February 2008, the BoE said.

After inching upwards for the last three months, the number of mortgage approvals for house purchases fell back to 61,341 in March from 61,523 in February.

Howard Archer, UK economist at IHS Global Insight, said that while this could be influenced by increased caution ahead of the general election, it "reinforces belief that the housing market is likely to improve only gradually over the coming months".

Data from the Land Registry earlier this week showed that the pace of house price increases moderated slightly to 5.3 per cent year on year in March, but a shortage of properties coming on to the market mean that most analysts expect prices to continue to rise.

There was slightly better news on business lending, with lending to non-financial companies ticking up by £2.7bn. However the overall trend remains downwards, with the 12-month growth rate still at -0.5 per cent.

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